Focus Two Innovation and Service. Focus Three Responsible Supply Chain. Strategies TSMC 2020/2025 Goals Achievements & Targets.

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1 Material Issue Climate Change and Energy Strategies TSMC 2020/2025 Goals Achievements & Targets Promoting Low-Carbon Continue adopting best practice approaches to mitigate emissions with the goal of being the industry s Low-Carbon leader Reduce unit wafer GHG emission (Metric tons of CO 2 equivalent /8-inch wafer e mask-layer ) to 18% below the year 2010 level 2020 Reduce unit wafer PFC emission (Metric tons of CO 2 equivalent /8-inch wafer e mask-layer ) to 60% below the year 2010 ; Reduce total PFC emission (Metric tons of CO 2 equivalent) to 20% below the year 2010 level 2020 Development of Renewable Energy Continue to purchase green power and install solar power systems, increase green power usage Continuously purchase renewable energy Note 2025 Improving Energy Efficiency Develop new energysaving measures each year, actively implement energy-saving measures, and increase power usage effectiveness Reduce unit wafer power usage (kwh /8-inch wafer e mask-layer ) to 12% below the year 2010 level 2020 Conserve a total of 2,800GWh beginning from Strengthening Climate Resilience Build up prevention and emergency reaction plans for climate disaster and reduce the impact of climate disasters Zero days of manufacturing interruption caused by climate change disasters 2025 Note: The regulatory and market environment isn t mature in Taiwan. TSMC purchase renewable energy & set up long-term goal once the conditions are mature 79

2 Strategies & 2020/2025 Goals 2017 Achievements 2018 Targets 13% Unit wafer layer GHG emissions were 13% less than 2010 Target: 13% Reduce unit wafer layer GHG emission to 15% below the year 2010 level 55% Unit wafer layer PFC emissions were 55% less than 2010 Target: 50% Reduce unit wafer layer PFC emission to 55% below the year 2010 level 6% Total PFC emissions were 6% less than 2010 Target: 4% Reduce total PFC emissions to 10% below the year 2010 level 10.4% Unit wafer layer power usage were 10.4% less than 2010 Target: 9% Reduce unit wafer layer power usage to 11% below the year 2010 level 510 GWh/600GWh Annual power savings / Cumulative power savings Target: Annual power-saving target of 280 GWh Cumulative power-saving of 370 GWh Annual power-saving of 200 GWh Cumulative power-saving of 800 GWh TSMC 2017 Corporate Social Responsibility Report Surpassed Achieved Unachieved 80

3 Climate change has greatly impacted the global ecosystem and people s lives. After the signing of the Paris Agreement, nations from around the world have affirmed the threat of climate change. TSMC clearly states in its Corporate Social Responsibility Policy and Environmental Protection Policy that adapting to climate change is part of its responsibility to sustainable management. TSMC continues to monitor the status of global climate change as well as changes in international and domestic mitigation efforts, and identifies potential risks and opportunities of climate change by utilizing a risk matrix on the aspect of government regulations, natural disasters and behavioral impact. TSMC has made continuous long-term efforts to serve as an industry benchmark for energy conservation and carbon reduction, and has been strengthening the requirements for its supply chain to do the same. TSMC collaborates with international industry associations and government agencies to promote carbon mitigation and identify the best available technologies to establish industry standards. TSMC aims to raise the supply chain s ability to respond to climate change and reduce climate risks in operations management. Jul. GHG Reduction & Acts (Taiwan) Feb. Trial Procedures of Shanghai Municipality on Carbon Emission Administration (Shanghai, China) Nov. COP21 in Paris Sep. Clean Air rule (Washington State, U.S.) Nov. Paris agreement effected House Gas Regulatory Restriction TSMC Actions Nov. Published CSR Policy Mar. Published Environmental Policy Feb. Created TSMC (China) carbon credit & trade flow May Aug. Carbon Platform launched Energy and Carbon Reduction Committee launched Mar. Jun. Jul. Renewable Energy Task launched Created internal carbon pricing & impact evaluation Joined Science Based Target initiative Note Note: Science Based Targets Initiative, SBTi is an initiative jointly established by the Carbon Disclosure Project (CDP), the "We Mean Business" Coalition, the UN Global Compact, and the World Wide Fund for Nature (WWF). It aims for companies to set reductions in line with the Paris Agreement. TSMC 2017 Corporate Social Responsibility Report 81

4 Types of Climate Risks and Measures Aspects Regulatory control of greenhouse gases cap and trading Energy consumption and carbon footprint Mandatory reporting of greenhouse gases Regulations Behavioral Impact Natural Disasters Wind damage, flooding, and drought leading to reduced production or disruptions Related parties demanding a green supply chain Aspects Consideration Measures Achievements in 2017 Mandatory reporting of greenhouse gases Implement data inventory: investigate greenhouse gas emissions and energy usage house gas inventory 100% completed Regulations Regulatory control of greenhouse gases cap and trading Implement carbon management: the Energy Conservation & Carbon Reduction Committee promotes energy saving and conducts quarterly review Annual energy saving targets 100% completed Established procedures on carbon credits and trade in FAB 10 Energy consumption and carbon footprint Produce green products: raise product energy efficiency, produce low energy consumption products for customers, analyze key factors for carbon reduction and energy conservation Energy efficiency of new generation production process raised Natural Disasters Wind damage, flooding, and drought leading to reduced production or disruptions Enhance Resilience of business operations: establish crisis management procedures and emergency responses Fab 15B designs followed climate resistance guidelines (all new fabs will follow ) Behavioral Impact Related parties demanding a green supply chain Strengthen collaboration with supply chain: calculate product footprint with suppliers to lower emissions and make purchasing decisions based on emissions. External promotion: support and promote climate change related programs and proposals Strengthened requirements for supplier-side greenhouse gas monitoring and increased their proportion in audit Proposed semiconductor energy conservation and carbon reduction benchmarks TSMC 2017 Corporate Social Responsibility Report 82

5 TSMC stands by its environmental promises, and continues to follow through on its many sustainability measures. Promoting energy conservation, carbon reduction, water saving, and circular economy are all important parts of our efforts to demonstrate the effectiveness of our environmental management and corporate social responsibility. TSMC will continue to share its green manufacturing experience, help the industry gain the competitive advantages of green enterprises, and contribute to the sustainable development of the earth. Total Risk of Climate Change Carbon Platform In response to global climate change and the House Gas Reduction and Act, TSMC established a cross-organizational platform for carbon management in The three main directives of the platform are: regulatory compliance, energy conservation and carbon reduction, and carbon asset management. TSMC planned and executed short, mid, and long-term reduction plans through the Energy Conservation and Carbon Reduction Committee, led by Vice Presidents of Operations with the support of the Corporate Environmental Safety Division in regulatory discussions around the country. Following the TSMC subsidiary in China, the American subsidiary WaferTech will also be required to lower greenhouse gas emissions in accordance with the Clean Air Act of Washington State in the United States. Faced with tightening rules and regulations regarding carbon emissions and trading, the Finance Department has decided to evaluate carbon asset risk, and devise mid to long-term plans based on energy conservation and carbon reduction goals, carbon credits, and renewable energy options. Legal Compliance Carbon Platform Carbon Credit Energy & GHG Reduction J.K. Wang Vice President, Operations/300mm Fabs GHG inventory (ISO 14064) Phased Regulatory Goals Product emission standard Cap and allocation principle Taiwan Renewable Energy Certificates (T-REC) Carbon credit & trade flow Early project Offset project TCFD ISO Science Based Target Facility energy saving Process tool energy saving F-GHG abatement building TSMC 2017 Corporate Social Responsibility Report 83

6 Three Aspects of Carbon Achievements in 2017 Regulatory compliance Energy Saving & Carbon Reduction Adhere to greenhouse gas regulations Support the carbon management commitments of the global semiconductor industry Establish greenhouse gas database (ISO14064/ ISO14067) Directly reduce greenhouse gas Establish and implement best available practice for greenhouse gas abatement Implement energy management system (ISO 50001) Initiate equipment energysaving projects Construct green fabs ow carbon investments Carbon trading platforms Participate in public hearings for regulations Member of the Industrial Development Bureau response team Member of the World Semiconductor Council greenhouse gas response team and convener of the energy conservation team Acquire greenhouse gas inventory certification -ISO Acquire carbon & water footprint certification -ISO14067 Establish e-platform Participated in establishing regulations for Phased Regulatory Goals and greenhouse gas emission rewards Participated in the analysis of industry emission controls and quota for the Phased Regulatory Goals and house Gas Emissions Rules. Continued participation and followed the WSC PFC reduction best practice. All fabs completed third-party greenhouse gas inventory verification Not required in 2017 (every 3-5 years) Energy Conservation & Carbon Reduction e-platform Enhancement Project Use low greenhouse warming potential gasses C 2 F 6 & C3F 8 (cleaning process) replaced by C 4 F 8 Install best available greenhouse abatement equipment Develop and implement new greenhouse gas abatement technologies Acquire energy management system certification ISO Identify the energy saving potential of production tools, propose energy-saving measures, and include energysaving features in tool purchasing decisions Fully installed new equipment in Fab 15B and replaced 62 tools in other fabs Installed nitrous oxide abatement equipment in Fab 15B Fab 12 phase 7 received certification Included energy-saving features in new equipment purchase guidelines Raise performance of fab systems Enhanced chiller unit performance by 9% Acquire green building certification Study Renewable Energy Certificate, REC Study carbon credits and trading systems Programmatic CDM - Clean Development Mechanism for certified emission reduction credits Fab 12 phase 7 received U.S. LEED certification All 12-inch fabs received green building certification Fab 6 solar-powered system is the first semiconductor foundry in Taiwan to receive T-REC (received 275 RECs) TSMC (China) purchased 280 thousand metric tons of carbon credits with carbon emissions in 2016 Fab 2/5, Fab 5, Fab3, Fab 14B, and Fab 15A applied for Clean Dry Air system (CDA) CDM Promoting Low-Carbon Aiming to Be the Leading Global Benchmark In response to the global mission of the Paris Agreement, TSMC continues to participate in the Carbon Disclosure Project (CDP Note ) and joined Commit to Action, a voluntary enterprise carbon reduction initiative in The most important step in the initiative is to set reduction targets to keep the global temperature rise below 2 degrees. TSMC is the first semiconductor company in Taiwan to join the Science Based Targets Initiative, SBTi. Under the 2 degrees scenario, the semiconductor industry aims to lower greenhouse emissions intensity to 87% below 2010 levels before TSMC successfully reached its targets by reducing gas used in the production process as well as exhaust gas. Due to these efforts, the greenhouse gas emission per product unit decreased 3% in 2017 over the previous year, and dropped 13% compared with In recent years, the increasing complexity of new generations of products has pushed TSMC to find more innovative methods in meeting government and company renewable energy policies to conserve energy and reduce carbon dioxide emissions. Note: Established in 2003, the Carbon Disclosure Project (CDP) is an independent, London-based, non-profit organization which supports companies to disclose environmental impact through the collection of carbon emission surveys. Carbon Assets and Credits Energy saving and carbon reduction incentives house gas emission reduction rewards Applied for greenhouse gas emission reduction rewards in 2018 Continue to work on voluntary carbon reduction Joined Industrial Development Bureau voluntary reduction project Renewable energy usage Study the Electricity Act Formed a corresponding task force Continue to purchase renewable energy Purchased 100 GWh of green electricity from Taiwan Power Company TSMC 2017 Corporate Social Responsibility Report 84

7 house Gas Inventory for Upstream and Downstream Supply TSMC has required all its fabs around the world to establish greenhouse gas inventory and disclosure by the greenhouse gas protocol since New fabs must begin inventorying greenhouse gases within 1.5 years after initial production. Each year, every TSMC fab must complete scope 1 and scope 2 greenhouse gas inventories for the previous year and pass the external audit of a third-party organization with ISO verification. TSMC began the scope 3 emission inventory and verified by a third-party since In 2017, TSMC and subsidiaries ramped up production and acquired VisEra. As a result, total greenhouse emissions increased 11% over the previous year. TSMC fabs in Taiwan accounted for 90% of the total carbon dioxide emissions of 8.15 million metric tons. Due to the development of advanced processes and the related power demand, the scope 2 greenhouse gas emission ratio is three times larger than scope 1. In addition to monitoring its own greenhouse gas emissions, TSMC is also concerned with the carbon footprint of final products and looks into the emissions of its upstream and downstream supply chain. The Company requests suppliers to have the ability to conduct their own greenhouse emission inventory. The largest emission in scope 3 emission data is generated by raw materials, followed by fuel and energy related activities and waste disposal. Scope 1 and Scope 2 house Gas Emissions Unit: Million metric ton CO 2 e Scope 3 house Gas Emissions Unit: Metric ton CO 2 e house Gas Emission Intensity Unit: Metric ton CO 2 e/8-inch e wafer-layer ,824 18, ,594 26,924 1,175,268 2,221,558 2,042 19, ,626 27,836 1,173,448 2,544,951 2,416 20,373 1,357 2,114 29,504 1,349,366 2,806, Scope 1- TSMC Scope 1- Subsidiaries Scope 2- TSMC Scope 2- Subsidiaries Note: TSMC total annual greenhouse gas emission data includes emissions from all TSMC fabs (as well as advanced backend facilities) in Taiwan and its subsidiaries WaferTech, TSMC China, VisEra. Materials Production Purchasing Energy Waste Generated in Operations Upstream Transportation Downstream Transportation Employee Commuting Business Travel Note 1: Scope 3 emissions include only data from TSMC fabs in Taiwan Note 2: According to the announcement of Energy bureau that 1 kwh emits kg of CO 2 equivalent and 1kWh = 3,600 Kilojoules. GHG Emission Intensity Science Based Targets Note 1: TSMC total annual greenhouse gas emission intensity data includes emissions from all wafer fabs belonging to TSMC and its subsidiaries. Note 2: Reduction targets are based on SBTi - Sectoral Decarbonization Approach (SDA) Note 3: Emission intensity normalized by the baseline data in TSMC 2017 Corporate Social Responsibility Report 85

8 1 Best mitigation results in the industry Best Mitigation Results in the Industry F-GHG is the main source of greenhouse gas emissions in the semiconductor manufacturing process, it accounts for over 80% of emissions. TSMC aims to lower direct emissions by optimizing gas usage and substituting F-GHG with low greenhouse warming potential gases and installing exhaust gas abatement equipment. In 2017, TSMC reduced 2.35 million metric tons of carbon dioxide on F-GHG emission reduction. Nitrous oxide (N 2 O) is the secondlargest source of direct emissions which TSMC is striving to reduce. Since 2016, TSMC and equipment vendors have been collaborating to develop high-performance N 2 O abatement and tail gas reduction equipment, and have completed verification on certain models. TSMC leads the industry by being the first to incorporate N 2 O gas abatement equipment into its new equipment standard. In 2017 TSMC s F-GHG emissions lowered significantly; emissions per unit decreased 6% over the previous year, not only reaching TSMC s own targets but is far outperforming targets set by the World Semiconductor Council s voluntary PFC agreement. Scope TSMC Best Practice Approach Achievements in 2017 ISO inventory and 3rd-party verification annual Includes all annual inventory and third-party verification for TSMC fabs and subsidiaries Gas usage optimization New fabs must adhere to best practices outlined in technical committee guidelines Scope 1 house Gas Direct Emissions Replace high greenhouse warming potential (GWP gases (current best available technology: remote plasma NF 3 / NF 3 / C 4 F 8 ) Install point of use (POU) abatement equipment for F-GHG processes All 12-inch fabs use remote plasma NF 3 ; 6-inch and 8-inch fabs use C 4 F 8 / NF 3 Subsidiaries to gradually replace C 4 F 8 / NF 3 New and existing fabs (including subsidiaries) must install POU abatement during new tools move-in Existing fabs abatement installation rate is up to 88% ; subsidiaries to gradually replace abatement equipment Existing fabs replaced 62 tools in 2017; 95 tools will be replaced in 2018 Lowest F-GHG emission per product unit in the world for semiconductor foundries Other greenhouse gases abatement technologies Continue to develop on-site nitrous oxide abatement technologies Completed nitrous oxide abatement equipment verification on combustive treatment equipment and listed it as standard equipment (first in the world for semiconductor foundries) ISO Energy management 3rd-party verification All 12-inch fabs completed ISO inventory and 3rd-party verification; some 6-inch and 8-inch fabs completed ISO inventory and 3rd-party verification Scope 2 house Gas Indirect Emissions Top-level management Vice Presidents of Operations lead the Energy Conservation & Carbon Reduction Committee as well as set and regularly review company targets New generation process tool development with energy-saving design Initiated energy conservation projects for new generation process tools (first in the global semiconductor industry) Utilize renewable energy Purchased 100 GWh of green electricity from Taiwan Power Company in 2017; largest purchaser of green power from Taiwan Power Company for 3 consecutive years Energy efficiency enhancement Highest energy efficiency in the industry 10-year target of 2,800 GWh of electricity saved; 510 GWh of electricity saved with 452 energy-saving measures in 2017 TSMC 2017 Corporate Social Responsibility Report 86

9 1 The first semiconductor manufacturer in Taiwan received renewable energy certificates 5.29 million trees Purchased a total of 100 GWh of green power in This reduced carbon emissions by about 52.9 million kilograms, equivalent to the carbon absorbed by 5.29 million trees in one year Development of Renewable Energy Owing to its corporate responsibility to protect the environment, TSMC continues to track developments in climate change. In addition to lowering power consumption, TSMC also takes concrete action by adopting renewable energy. TSMC fully supports the government's policy, and commits to directly purchasing renewable energy once the regulatory and market environment is mature in the future. This move will effectively reduce greenhouse gas emissions and proactively supports the United Nations' sustainable development goals. Purchasing Power In response to the government's renewable energy policy, TSMC has purchased green power as a way of supporting the development of renewable energy. The Company purchased a total of 100 GWh of green power in This reduced carbon emissions by about 52.9 million kilograms, which are equivalent to the carbon absorbed by 5.29 million trees in one year. Since 2015, TSMC has been the biggest green power purchaser by cumulatively subscribing for 400 GWh of green energy for the last three years, accounting for 64.4% of the total green power sold in Taiwan. newly installed Fab 6 solar power plant was certified by the National Renewable Energy Certificate Center. TSMC also obtained 275 renewable energy certificates for the entire year, making it the first semiconductor manufacturer in Taiwan to receive renewable energy certificates. All these pro-active measures highlight TSMC's commitment towards the development of Taiwan's renewable energy. TSMC will monitor local renewable energy development aggressively, purchase renewable energy and continue to install renewable energy generation equipment to fulfill our responsibility of global citizenship and support government strategy. We want to support renewable energy through concrete measures to make on impact on the mitigation of climate change. Installed Capacity of Renewable Energy Unit: kw 0 1, , , ,893 1,322 1,893 Improving Energy Efficiency Comprehensive energy inventory TSMC's total energy consumption in 2017 was 12,016 GWh, of which power usage accounted for about 94.8% of total energy consumption. This was followed by natural gas, which accounted for about 5.2% of total energy consumption. Diesel consumption is less than 0.03% of total energy consumption. TSMC's electric power is mainly used in manufacturing by process equipment and facility systems. The Company uses ISO for energy management and cross-fab energy efficiency comparisons to find the best operating model and make company-wide adjustments to obtain Total Energy Consumption Unit : GWh , , , , ,388 Installing Renewable Energy Power Generation Equipment TSMC has also installed solar panels inside its science parks to generate renewable energy for its facilities. In 2017, the Company's total solar panel capacity expanded by 550 kw and combined with the 30 kw used by its subsidiary, VisEra Technology, total solar panel capacity reached 1,893 kw, generating 1.5 GWh. This reduced carbon emissions by 770 metric tons, equivalent to the carbon absorbed by 77,000 trees in one year. TSMC will continue to expand its solar panel capacity by 1,322 kw in In 2017, the Already installed Newly installed Note: Total Installed Capacity of Renewable Energy Power Generation Equipment include TSMC (all fabs and packaging and testing facilities located in Taiwan) ) as well as its overseas subsidiaries (WaferTech, TSMC (China), VisEra Technology) Power consumption (GWh) Diesel consumption (GWh) Natural gas consumption (GWh) Note 1: The total energy consumption includes TSMC (all fabs and packaging and testing facilities located in Taiwan) as well as its overseas subsidiaries (WaferTech, TSMC (China), VisEra Technology) Note 2: The conversion unit is 1 cubic meter of natural gas = 10.4 kwh, 1kWh = 3,600 Kilojoules TSMC 2017 Corporate Social Responsibility Report 87

10 maximum efficiency from each kwh consumed. TSMC s unit power consumption was 9.5 (kwh/8-inch e waferlayer) in 2017, 10.4% lower than 10.6 (kwh/8-inch e waferlayer) in Additionally, this was 1.4% lower than the Company s optimum performance of 9% in Natural gas is mainly used for boilers, Volatile Organic Compound (VOC) treatment systems and burn-type Point-of-Use Waste Gas Treatment systems to reduce direct fluoride gas emission and greenhouse gas emission. In 2017, TSMC consumed cubic meters of natural gas per 8-inch wafer per mask layer. Diesel is primarily used in emergency power generators and fire pumps, which are only engaged during power supply disruptions, scheduled maintenance and emergencies, and is not a direct energy source for production. The Company consumed approximately 409 kiloliters in Enhancing Power Usage Effectiveness Due to the expansion and increasing complexity of advanced manufacturing process, TSMC expects power consumption will continue to increase. To maximize energy efficiency, and in response to the government's energy-saving targets, TSMC has invested heavily in energy-saving measures and had laid out an implementation plan from 2016 to 2025 that targets an average annual energy-saving rate of greater than 1%. By 2025, new energy-saving measures are expected to reduce energy consumption by 2,800 GWh as well as reduce carbon emissions by 1.48 billion kilograms, which is equivalent to the carbon absorbed by 148 million trees in one year. Compared to the absence of energy-saving measures, total power consumption has fallen by 13%. Total Power Consumption Unit: GWh 5, , , , , Unit Power Consumption and Goal Completion Unit: kwh/8-inch e wafer-layer TSMC 10-year Energy-Saving Targets Unit: GWh 90 GWh Achieved in GWh Additional Energy Saved in 2016 Average Annual Energy Savings Rate from > 1% 2,800 GWh of Total Energy Saved by , Taiwan Sites Subsidiary Note 1: The total power consumption includes TSMC (all fabs and packaging and testing facilities located in Taiwan) as well as its overseas subsidiaries WaferTech, TSMC (China), VisEra Technology Unit Power Consumption (Actual) Unit Power Consumption (Goal) Note 1: The indicator for power consumption per wafer-layer includes all wafer fabs of TSMC and subsidiaries. Note 2: This calculation does not include diesel and natural gas, as these are not used for production TSMC 2017 Corporate Social Responsibility Report 88

11 TSMC's energy management is based on ISO It develops energy-saving management platforms, implements energy audits, and strives for the most efficient use of each kwh. In 2017, TSMC's Facilities Department became the first to apply Big Data in the analysis of airconditioning energy-saving parameters. In the process, it was able to develop an optimal control program, which can automatically adjust chilled water system and its auxiliary equipment to the best energy-saving point, effectively improving the efficiency of thechilled water system by 9%. TSMC also held classes on energy saving and carbon reduction to share its knowledge with the industry. The Process Equipment Department has focused on replacing Additional Energy-Saving Performance 2017 Air Conditioning Energy Saving Energy saved from Automatic Chilled Water System AC Energy-saving Adjustment All Fabs Total 29 items, saved GWh, reduced 54,000 metric tons of CO 2 Performance Improvement Modified wet film for large AC humidifier All Fabs Total 75 items, saved 34.4 GWh, reduced 18,000 metric tons of CO 2 Lighting Energy Saving Non-cleanroom intelligent lighting Replace LED light All Fabs Total 3 items, saved 14.1 GWh, reduced 7,000 metric tons of CO 2 Fab Energy Saving Standby Energy Saving Uninterrupted power system energy saving mode Energy saving from site-type waste disposal standby machine inefficient components and optimizing equipment energy consumption. TSMC's annual energy-saving plan included 452 energy-saving measures across eight categories, reducing consumption by 510 GWh, eliminating 270,000 metric tons of carbon dioxide emission and saving NT$1.28 billion in electricity costs. In addition, reducing carbon emissions also saved NT$400 million in potential external carbon costs Note. The energy-saving measures of TSMC's subsidiary companies, such as WaferTech, TSMC (China), VisEra Technology, were mainly focused on using LED lighting, as well as replacing old and worn equipment. In 2017, a total of 4.5 GWh of energy was conserved. Note: Computed using a NT$1,500 fine per metric ton for direct and indirect carbon emissions (metric tons) levied by the Taiwan government Energy Usage Reduced power consumption of process cooling water system Reduced power consumption of process exchaust machines 12-inch Fabs / Fab 3 / Fab 2 & 5 / Fab 6 Total 17 items, saved 48.3 GWh, reduced 26,000 metric tons of CO 2 Production Equipment Energy Saving Unit Replacement Replace with high efficiency, energysaving units Fab 3 / Fab 2 & 5 / Fab 6 / Fab 8 Total 4 items, saved 18.7 GWh, reduced 10,000 metric tons of CO 2 Purchase Requirements New machine purchase, using high efficiency, energy-saving auxiliary equipments Fab 15B 1 item, saved 20.2 GWh, reduced 11,000 metric tons of CO 2 Equipment Improvement Optimized power consumption of equipment units All Fabs Note: Carbon equivalent coefficient factor= kg/ kwh Total 60 items, saved GWh, Total 263 items, saved GWh, reduced 89,000 metric tons of CO 2 reduced 55,000 metric tons of CO 2 TSMC 2017 Corporate Social Responsibility Report 89 All Fabs

12 Strengthening Climate Resilience TSMC assesses climate related risks annually to protect its TSMC promotes industry benchmarking by inviting government agencies and academia to attend Energy and Carbon Reduction Committee meetings operations against climate change and extreme weather. The Company s standardized guidelines focus on weatherrelated factors which could disrupt daily operations such as drought, power shortages, flooding, and wind damage. All fabs are required to carry out assessments to prevent all potential damage from natural disasters and avoid any disruption to production. The newly-completed Fab 15B was designed specifically with climate resistance guidelines in mind, and other fabs have also made changes according to these guidelines. Leading the Industry in Facing Climate Changes TSMC understands the challenges of climate change. It is a difficult mission which requires the cooperation of the entire industry, from upstream to downstream vendors, and adherence to government policies to complete this task. TSMC fully supports the planning and implementation of government policies and acts as industry and trade association representative and committee member of the Energy White Paper and house Gas Expert Advisory Committee, offering feasible benchmark solutions and advice. TSMC is also the ESH Committee Chairman of the Taiwan Semiconductor Council and World Semiconductor Council. In addition to hosting regular conferences and forums to discuss best approaches in energy conservation and carbon reduction, TSMC also actively pursues the best feasible benchmarks, including F-GHG Reduction Best Available Approach Guidelines and F-GHG and N 2 O Abatement Approaches. TSMC possesses a strong resolve to lead the global semiconductor industry through its actions. Power Shortage Climate Risks Wind Damage Flooding Drought Strengthening Approach Design of 12-inch fabs follow the LEED (Leadership in Energy and Environmental Design) framework Establish power shortage emergency response procedures: each fab needs to have its own power generators which can supply at least 15% of the power demand Foundation of new fab in Tainan raised by 2 meters to reduce flood risks Improve exterior public facilities and examine key supplier flood risks based on trend analysis. Install tide gates in high-risk fab buildings Implement water conservation measures in the company and raise rate of water recycling in production Support government water recycling policy and commit to the use of recycled water Establish emergency response procedures for droughts: each fab needs to have a reservoir (plus water source and water truck) which can supply enough water for 2 days (at the highest 20% cutbacks) Strengthen the wind resilience of exterior facilities (cooling tower, waste treatment) Fab 15 Implementation Status in 2017 New fabs are designed based on the LEED framework and can save 27% more energy Power generators can supply up to 30% of the power demand Taichung and Hsinchu sites has no foreseeable flood risk after analysis Completed installation of tide gates Implemented best available water conservation technologies Fab 15 has no supply of recycled water on-site Set up emergency response measures for water shortage and water reservoirs Raised the wind resistance of new fab s external facilities TSMC 2017 Corporate Social Responsibility Report 90

13 Case Study Using Big Data Analysis to Develop Intelligent Chilled Water System In 2017, TSMC analyzed the energy consumption of its plants and discovered that its chilled water system accounted for as much as 20% of its total power consumption. The issue of enhancing its plants' operational efficiency, therefore, became an important concern. Through a study of Big Data and after examining close to 500,000 operational data, TSMC was able to successfully develop "an optimal energy-saving control program" for its chilled water system. While the conventional method focuses only on enhancing the energy efficiency of a single piece of equipment or device, this new model - the first in the industry - takes things a step further by taking into consideration the entire chilled water system, dynamically adjusting the temperatures of the chilled and cooling water. Furthermore, it automatically adjusts the system to its "optimal energy-saving point" based on varying external air conditions and on-site loads, and in the process, increases operational efficiency by as much as 9%. In addition to its innovative energy-saving measures, TSMC has always been strict and rigorous in conducting risk assessments. Prior to the full implementation of the "optimal energy-saving control program" for its chilled water system, the Company first tested the program on its Fab 12B plant for six months and monitored 260,000 air-conditioning parameters. After ensuring that no abnormalities were seen in 100% of the parameters, the program was officially incorporated into its production system in the third quarter of The system is currently part of TSMC's advanced manufacturing process and has helped the Company conserve 58 GWh of electricity in 2017, an estimated 11% of the Company's annual energy savings. The smart energysaving chilled water system is considered a major breakthrough in the industry for energy conservation. For more details, please refer to our website: "TSMC Successfully Developed Industry's First Chilled Water System Optimization, Energy-Saving Control Program" Traditional Control Point Manual Adjustment Single equipment energy saving: Cooling Tower Does not consider for power consuming of other equipment: Chiller Optimal Control Point Automatic Control Considering the correlation of power consumption between each equipment Chiller Chilled Water Pump Cooling Water Pumps Cooling Tower 58 GWh 2017 Saving Contribution 9 % Increased efficiency TSMC 2017 Corporate Social Responsibility Report 91

14 Case Study TSMC Generously Shares its Energy-Saving and Waste Reduction Methods TSMC is fully committed to environmentally friendly actions and integrates green management and development strategies into its corporate culture. Internally, the Company holds competitions for energy-saving proposals, inviting colleagues to brainstorm and share their ideas, with the aim of developing more efficient and more innovative energysaving projects. Externally, the Company shares its energy-saving and waste reduction experiences with the public through education and training courses. As a continuation of the Company's successful educational model in the past, TSMC again launched two free classes on "Energy Conservation Practices and Energy Strategies and Resource Regeneration in Hsinchu, Taichung and Tainan in These classes, as well as actual plant visits, were personally handled by highly qualified TSMC employees, who shared their experiences in corporate benchmarking practices. Originally only six classes were scheduled but this was increased to nine due to the number of registered attendees. These talks attracted 357 participants from the manufacturing sector, the medical and healthcare field, as well as college professors and students Energy-saving and Waste Reduction Course Plan Feedback from Participants Energy-Saving Energy Monitoring and System Air Conditioning System Operational Optimization Strategy Sharing of AC Energy-saving Practices Sharing of TSMC's Energy-saving Measures Waste Reduction Recycling and Regulatory Practices Industrial Water Treatment Technology Enhancement Wastewater Classification and Recycling Evolution Waste Recycling and Recovery 72% 72% of participants, who joined this activity, changed their opinion and concept concerning energy-saving and carbon reduction 48% 48% of participants who joined this activity, claimed that it helped them identify areas where they can conserve energy TSMC would love to not only share our green management knowledge but also arrange a site tour visit. The various kinds of facility systems are categorized by different colors or shapes clearly indicating on/off. This method is for reducing miss operation, it could be a reference to THSR for managing valves. Chia-Ho Chen Senior Specialist of Taiwan High Speed Rail TSMC 2017 Corporate Social Responsibility Report 92

15 Case Study Host Tool Energy Saving Workshop, Accumulation of Innovation Energy innovation is the responsibility of every In 2017, TSMC initiated Tool Energy Saving Each competition proposal has to consider In 2017, there were 223 energy-saving cases TSMC employee. Through full implementation Workshop. Through competition prizes various power applications and process presented in the workshop. Three Best of energy reduction activities, hosts of and praise, TSMC encourages colleagues stability in the production process. All were Energy Saving Awards, three Innovation cross-organizational energy-saving ideas to brainstorm for innovative and feasible reviewed in three aspects, as "Feasibility", Awards and three excellent Awards were competitions encourage their colleagues energy-saving solutions. Driven through cross- "Energy Saving" and "Innovation" from 16 chosen. The estimated energy saving from to continue to identify energy saving function study and learning, TSMC improves TSMC internal judges. After the first screening them is 198 GWh annually. opportunities from daily operations and put colleagues' ability to solve tool energy saving for nine finalists and reexamination, the best them into action. problems. proposals stood out Tool Energy Saving Workshop Ideas Category 2017 Tool Energy Saving Workshop Base Cases Precision control the components 7% Optimization setting on recipe 1% Category Cases Benefit Reasonable Environmental Control in Machine Correct the temperature control mechanism of furnace tube, find the best energy saving mode Energy Saving > 6% Use high performance/ low energy components 33% Tool Energy Saving Worksshop Ideas Category 59% Reasonable environmental control in machine Optimization Setting on Recipe Use high performance /low energy components Simplify the running step of the clean tool, find out the optimization model for water and power consumption Use high-efficiency, energy-saving motors and heat exchangers, find the most suitable and low-energy configuration Energy Saving > 10% Energy Saving > 20% TSMC 2017 Corporate Social Responsibility Report 93

16 Case Study Tasks of 2018 Carried out the First Independent Ecological Survey of the Domestic Semiconductor Industry in Taiwan Source diversion to tools in production facilities. Improve the efficiency of ammonia nitrogen treatment system In 2017, TSMC s aggressive response to the United Nation's Development Goals (SGDs), (UN Development Goal 15: Protect, restore and promote sustainable use of terrestrial ecosystems...and halt biodiversity loss.) and the Aichi Biodiversity Target, conducting the first independent eco-survey in the domestic semiconductor industry, as well as evaluating the impact of the Company's operations on the environment and on biodiversity. Results of the study showed that there were more than 493 species of plants and 209 species of animals found within TSMC's science parks. The results of the ecological survey highlighted not only the extremely abundant and rich variety of species found inside TSMC's science parks, but showed the balanced and harmonious stewardship of the Company with the environment. TSMC has produced outstanding results in green sustainability. With its clearly defined ecological development goals and positive actions, the Company has, through its, conservation, Eco-Friendly, and Education Policies, sought to protect the country's natural resources. The Company has carried out multi-level greening within its science parks as well as established a diverse habitat. For example, by establishing ecological zones, channels, and ponds to bring in water, the Company has provided a welcoming habitat for birds and butterflies. In addition, to ensure a balanced biodiversity, the Company has gradually introduced native plants on the ground, cultivating a rich collection of plant Four Ecological Sustainability Strategies of TSMC TSMC s ecological sustainability of green park Design of Belt in Series A Series of Disconnected Belt Expanding Area Planting of Trees Ecological Environment Monitoring Ecological Environment Monitoring Non-toxic Maintenance Encouraging Environmentally Friendly Farming species that will attract butterflies and birds by offering copious opportunities to feed. In 2018, as the Company strives to exert a greater green influence on its environment, it will focus on the conservation of rare and endangered species, including the migration of threatened species such as the Cuora flavomarginata (Chinese Box Turtle) to livable environments and the independent cultivation of Lavandulaeleaf dendranthema (delicate native flowers) and other endangered plants. For more detail, please refer to our website: "TSMC Strikes a Balance between Technology and Ecology" Dendranthema Lavandulifolium Conservation Conservation of Native Endangered Plants Threatened Species of Protection Habitat Protection and Reconstruction Ecological Education Activities Environmental Education Facility Building Visiting Activities Promoting Ecological Education Natural Resource Note: UN Development Goal 15: Protect, restore and promote sustainable use of terrestrial ecosystems...and halt biodiversity loss 94